On January 8, 2014, CIRC issued a draft notice (Draft Notice) for public consultation aiming to revise theInterim Measures on Use of Insurance Funds (the Interim Measures), which took effect in late 2010 when CIRC first set about reforming the insurance asset management sector. According to the Draft Notice, CIRC proposes replacing the clause setting out detailed investment ratio requirements on insurance funds with a more general clause stating that CIRC would separately regulate and/or adjust relevant investment ratios of insurance funds.
By way of background, since late 2010, CIRC has taken several steps to liberalise investment restrictions on insurance funds and provide greater flexibility in asset allocation. In addition to the Interim Measures, CIRC has already issued several other implementation rules regulating investment ratios of insurance funds investing in various product categories. These regulations show some inconsistency with the Interim Measures. By proposing a more general clause in the Interim Measures CIRC would be able to adjust investment ratio requirements in specific areas and, therefore, avoid any potential conflicts.
Following the issuance of the Draft Notice for public consultation, which marks the first step of CIRC’s reform of the use of insurance funds, the vice chairman of CIRC discussed three other strands to facilitate reform that will be implemented this year. These are:
- establishing a centralised registration and trading system for insurance asset management products for the ease of investors’ entry and exit;
- setting up an asset management association for insurance companies in order to handle the registration matters for insurance asset management products; and
- reforming the investment scale and scope of insurance funds such as broadening infrastructure investment, refining policies on investment in equities, real estate and overseas investments, and better servicing the real economy through the use of insurance funds.
According to an earlier report, CIRC had announced that it would consider allowing insurance companies to invest in the Second Board at the Shenzhen Stock Exchange where the shares of start-up companies are listed, and permitting insurance companies to invest premium received on policies sold at least 15 years ago into blue-chip stocks in a trial programme. CIRC is trying to reduce unnecessary prior administrative approval of insurance funds by strengthening post-risk prevention such as ongoing supervision of disclosure, internal control and solvency maintenance, among others issues.
2014 is expected to be another growth year for China’s insurance asset management sector following its initial boom in 2010.